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Anger explodes at Germany, Italy and Hungary over Europe’s failure to cut Russia off from SWIFT payment network

Fortune logo Fortune 2/25/2022 David Meyer
24 February 2022, Berlin: Participants in a solidarity demonstration for Ukraine stand in Paris Square with a poster "Cut Swift Cut Russia Off". © Paul Zinken-picture alliance via Getty Images 24 February 2022, Berlin: Participants in a solidarity demonstration for Ukraine stand in Paris Square with a poster "Cut Swift Cut Russia Off".

As Russian troops enter Kyiv and the European Union prepares to sign off on fresh sanctions against Russia for its invasion of Ukraine, there is widespread fury against the countries that are blocking the heaviest potential sanctions.

German Chancellor Olaf Scholz said Thursday that Russia should not yet be cut off from the SWIFT global payments system, because it is "very important" to keep such drastic measures "for a situation where it may be necessary." Italy is also reported to have opposed the measure in order to maintain some leverage over Russia's dictatorial President Vladimir Putin.

Both Germany and Italy are highly dependent on Russian natural gas, which would be difficult to pay for if Russia really were to be cut off from SWIFT; Austria has the same dilemma, and is taking a similar approach. All three of these countries also have other extensive business ties with Russia, with Italian and Austrian banks being highly exposed right now. French banks also do a lot of business in Russia, and France has also declared a SWIFT cutoff to be "the very last resort."

And then there's Hungary, whose hard-right leader Viktor Orban has long had a friendly relationship with fellow culture warrior Putin. As with President Milos Zeman of the neighboring Czech Republic, Orban appears to have changed tack in the last couple days, condemning Russia's invasion and professing to stand with Ukraine—however, he is yet to follow Zeman in calling for the SWIFT option, which the Czech leader says is "needed to isolate a madman."

Again, energy likely plays a part—Hungary signed a deal with Moscow just a few weeks ago that will allow it to buy Russian gas far below market prices.

Pressure rises

Video: Zelenskyy asks European Union to give Ukraine 'immediate' membership (USA TODAY)

European signoff would be essential for cutting Russia off from SWIFT, because the payment network is based in Brussels, Belgium. Now, ahead of a mid-afternoon meeting at which the measures will be finalized, the pressure is on to change minds.

"In this war everything is real: Putin’s madness and cruelty, Ukrainian victims, bombs falling on Kyiv. Only your sanctions are pretended," tweeted former Polish prime minister and European Council president Donald Tusk on Friday morning. "Those EU governments, which blocked tough decisions ([among them] Germany, Hungary, Italy) have disgraced themselves."

Ukrainian Foreign Minister Dmytro Kuleba said Thursday said that "everyone who now doubts whether Russia should be banned from SWIFT has to understand that the blood of innocent Ukrainian men, women and children will be on their hands too." And on Friday morning, Defense Minister Oleksii Reznikov urged people to share the realities of the invasion "in the Italian, German and Hungarian media space" and among European officials.

"Everyone who knows the appropriate languages—you are our weapon," Reznikov said in a Facebook post.

There is general agreement that cutting Russia off from SWIFT would make life much harder for the country, but some argue that it wouldn't have as stark an effect as it might have in the past, because Russia could partially fall back on alternatives developed domestically and in China.

Whatever the strength of its impact, though, it remains unclear what sort of action Russia would have to take to convince SWIFT skeptics that the time has come to shut it out. After all, Putin's actions so far have given no indication that sanctions of any sort will change his mind, and his assault on Ukraine has been anything but partial.

"Russia has gone for total war and there is no follow on," said Dutch lawmaker Ruben Brekelmans, describing the last-resort argument as "nonsense."

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